Realpolitik needs hard currency decisions

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Currency wars, like real wars, are hard to stop once started. Nearly every day
brings news of another front being opened as more countries conclude — in
Sir Mervyn King’s words this week — that “only a lower real exchange rate
will provide the stimulus to demand that their economies require”.

The Bank of England Governor was too polite to name those he feels have been
most active in “competitive depreciations”, but it is fair to suggest those
he had in mind include Japan, whose central bank has just been strong-armed
by its new Prime Minister to target 2 per cent inflation;

It is understandable that the construction of an air-polluting,
noise-blighting £22 billion third runway to turn Heathrow into the world’s
pre-eminent superhub caught the eye, but the Davies report into airport
expansion also made another radical suggestion: that — third runway or not —
Heathrow should start acting like the UK hub that it pretends to be